Observations by an academic researcher on the use of “open”-ness as a competitive strategy, with a particular interest in coping with the commoditization of information goods and technologies in an Internet-enabled world.

Monday, June 18, 2007

Monday brought the news that the leading US video rental chain, Blockbuster, is rolling out Blu-ray nationwide and dropping HD DVD. Endgadget seems to think it’s game over in the next-generation DVD format war between Toshiba and Sony.

I’m more inclined to agree with Forbes that Blu-ray is pulling ahead. The interesting thing is that Blockbuster’s decision after a 250-store trial reflects consumer demand rather than that Blockbuster (a shell of its former self) has the power to sway markets.

Of course, Sony already won the important first round: five of the big six Hollywood studios back Blu-ray, with only Universal in the HD DVD camp. So it’s not surprising that consumers would want to rent Pixar or Paramount movies instead of limiting themselves to one studio. (This raises the question of why Toshiba launched HD DVD without broader backing).

If Sony does win, this would also influence the Microsoft vs. Sony video game war, since Xbox 360 has HD DVD and the PS3 (natch) has Blu-ray. (Neither format will have any impact on Wii, which is what American consumers really want for a videogame console).

Competition is messy, but competition is good. There was some talk of merging the two standards (as happened with DVDs), but that likely would have doubled the patent royalties paid by every manufacturer of disc players.

The final round will come on the store shelves. Will Best Buy and Wal-Mart stop shelving HD DVD players? I remember how hard it was to find a Beta VCR back in 1990 after ours was stolen in a burglary. At that point, there were only two manufacturers left for what had long since become a declining market: Sony and Toshiba.